Friends
Another hotter than expected inflation number poses a problem for the “Fed is going to lower rates soon” crowd. Today it was the Producer Price Index which measures prices at the wholesale level. All of a sudden, we aren’t seeing the level of inflation fall anymore. That could be a problem for the Fed who indicated earlier this year that they are inclined to begin lowering rates. These recent hotter than expected inflation numbers continue to delay any rate reductions.
Stocks and bond prices fell after the report. For the day, the Dow Jones Industrial Average was down 137 points to close at 38,905. The S&P 500 was down 14 points to finish the day at 5,150. The Nasdaq Composite Index was down 49 points to close at 16,128. Gold was down $14 to trade at $2,166 per ounce, while oil was up $1.37 to trade at $81.09 per barrel WTI.
The bull case for stocks, which has been good, is finally running into some headwinds- namely a little resurgence of inflation. We know valuations are high, but valuation is not a timing mechanism. Stocks can stay over or undervalued for long periods of time. Price movement needs a catalyst. The Fed and interest rate narrative might be a problem for the “lower interest rates/higher stock prices” crowd if these sticky inflationary numbers persist. In the meantime, let’s see how the week finishes out tomorrow.
Have a nice evening everyone.
